IRS Seeks Comments on Proposed Revisions to Voluntary Disclosure Procedure (12/23/25; 2/27/26)

 On December 22, 2025, the IRS opened a 90-day public comment period, ending March 22, 2026, for proposed updates to its Voluntary Disclosure Practice. See IRS seeks public comment on Voluntary Disclosure Practice proposal (12/22/25), here. The indicated updates are short, so I will not summarize them here.

I mention the items that drew my particular interest with some comments as appropriate:

1. Pay all applicable taxes, penalties, and interest in full within 3 months of conditional approval. Previously, as I understood it, the VDP permitted the taxpayer to undergo IRS processes for installment payments or perhaps even compromise. The update requires full payment.

2. As before “The disclosure period will generally cover the most recent six years for delinquent and amended returns (the “Disclosure Period”).”

3. Taxpayers must start the process by submitting “Form 14457, Voluntary Disclosure Practice Preclearance Request and Application” where they "identify all years of noncompliance and provide a full and accurate description of the taxpayer’s willful noncompliance.” Note that, as stated, the disclosure of all years is not limited to the “Disclosure Period” as defined. The Form 14457 is now required, so this is not a change. I mention it because the Form itself seems to tie the disclosures to the Disclosure Period. See e.g., Instructions for “Line 3. Tentative years for which you are making the disclosure. See infra regarding determination of disclosure period.” Is the IRS really going to require all periods of willful noncompliance, even if prior the noncompliance in the Disclosure Period and even outside the normal criminal statute of limitations of six-years. Maybe.

Update on IRS Form 11457 for Voluntary Disclosure in IRS VDP (6/30/25)

 The National Taxpayer Advocate announced that, at her urging, the IRS has agreed:

1. to eliminate the Part II (complete upon acceptance into the VDP) checkbox

2. to establish a “working group to comprehensively review the current VDP, provide recommendations for reforming the program, narrow the definition of illegal source income to encourage greater participation in the VDP, and clarify other terms.”

See Criminal VDP: TAS Reports a Win For Taxpayers – IRS Agrees to Remove Willfulness Checkbox on VDP Application Form (NTA Blog 6/24/25), here.

I revised the working draft of the Federal Tax Procedure 2025 Editions (to be published at least by early August 2025) to include this information. Perhaps the key issues I mention in the working draft are:

• As of the date of this publication, the Form available on the IRS website is dated 11/12/24 and thus does not yet implement that decision. Can a taxpayer in the meantime omit checking the box in the currently available Form?;

ABA Tax Section Comments on VDP Disclosure Form 14457, Voluntary Disclosure Practice Preclearance and Application (1/5/25)

I previously expressed concerns about the IRS VDP Practice reflected in Form 14457, Voluntary Disclosure Practice Preclearance and Application (November 2024) I was concerned with the requirement that the taxpayer admit criminal willfulness in order to complete parts of the application. IRS Voluntary Disclosure Practice (VDP) Requires Taxpayer Admit Criminal Willfulness (11/29/24; 1/5/25), here.

The purpose of this post is to alert practitioners of the ABA Tax Section’s Comments on the Form 14457. See 12/20/24 Abreu Cover Letter to Werfel, Commissioner, with Comments on VDP and Streamlined Filing, TN here.

I do not offer further comments principally for lack of time and energy (I came down with a significant serious flue-type affliction shortly after Christmas, and have not regained full energy but should later next week (in which I case I might offer comments by expanding this blog entry)). In addition, I am not yet sure that my comments could add anything material to the ABA Tax Section comments. See the list of persons contributing to the comments.

I also alert readers that I have significantly revised (or re-revised) the VDP discussion in my Federal Tax Procedure Book. The revisions are here. See also Federal Tax Procedure Book 2024 Editions Updates (7/26/24; 1/5/25), here.

IRS Voluntary Disclosure Practice (VDP) Requires Taxpayer Admit Criminal Willfulness (11/29/24; 1/5/25)

The IRS Voluntary Disclosure Practice (VDP) is implemented by Filing Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, here. The Form includes instructions on pages 8-19. The instructions are clear that VDP is for disclosure of willful conduct.

Some claim that willful conduct may cover conduct beyond the criminal definition of willful conduct required for tax crimes and FBAR crimes. As to the tax crimes, see Cheek v. United States, 498 U.S. 192 (1991); as to FBAR crimes, see Ratzlaf v. United States, 510 U.S. 135 (1994). For example, FBAR civil penalties require willful conduct, but willful for the FBAR civil penalties may include recklessness, which imposes liabilities on conduct not criminalized for willful conduct.

An example of a claim of at least the possibility of the VDP willful requirement going beyond the Cheek/Ratzlaf standard of specific intent to violate a known legal duty is the following from Baker & McKenzie’s web site title “United States: IRS tightens voluntary disclosure rules” (11/25/24), here (viewed 11/29/24).

The new "willfulness" check box requires that taxpayers certify that they were "willful in the actions that led to…tax noncompliance," and a failure to formally admit intent will result in automatic denial of access to the VDP with no opportunity for appeal or reinstatement. "The "willfulness" checkbox represents a significant change from past procedure and may make taxpayers less likely to participate in the program. Previously, the VDP process did not require a formal admission of intent—taxpayers detailed their conduct through the narrative explanation or had unique facts that led them to want to use the VDP as a hedge in a non-willful situation. Now, however, such options are off the table. While the taxpayer may want to choose to make the voluntary disclosure, there is a lack of clarity because the term "willful" is not defined on the form. The IRS website merely establishes that "willfulness" is not mistake but an intentional effort to hide assets or tax liability. However, there are different definitions of the term "willful" in different tax contexts, and it is not clear from the instructions on the form whether a civil or criminal definition of "willfulness" applies. Additionally, there are grey areas around when an action is willful versus a mistake or a failure to correct, and different practitioners may have different opinions about whether or not an action was willful. It is not clear from the new form how the IRS will evaluate the taxpayer's admission of willfulness. There is another potential caveat to the new requirement to admit that past tax noncompliance was willful: acceptance to the VDP, even after admitting willfulness, is not guaranteed, and there are ways a taxpayer can lose the benefit of the program (discussed later in this article). If the taxpayer loses VDP benefits or is not accepted into the program despite the admission of willfulness, they are potentially at risk for the admission to be used against them in a civil or criminal proceeding.

With due respect, however, I think the IRS instructions and web site are clear that criminal Cheek/Ratzlaf willfulness is required. I have on 1/6/25 made an update to my Federal Tax Procedure Book for the portion of the book dealing with the IRS VDP. See the page to the right titled “Federal Tax Procedure Book 2024 Editions Updates (7/26/24; 11/29/24)”, here. In that 1/6/25 update here, I include a discussion of this issue as follows (footnotes omitted) with respect to step one of the Form (Part 1) required for the initial application (footnotes omitted):